Practical Lessons from Guy Spier

[00:00:00] [SPEAKER_00]: The majority of your returns will result from your big winners. And the question that arises, if that is the case in a passive portfolio that is selected once, every time I intervene in the portfolio, I'm going to be paying transaction costs of one form or another. And I need to ask myself, how likely is it that the intervention that I'm going to make is going to outweigh this basic principle that a few winners are going to carry the portfolio forward?

[00:00:26] [SPEAKER_00]: My experience is that everybody is a long-term investor until the prevailing and they're not. Everybody says having a well-defined circle of competence. And how do you decide there's something in your circle of competence or not? You know, and you buy something, I buy something I think that's totally in my circle of competence. And then it goes down by an endless amount. And I say, well, is it actually in my circle of competence?

[00:00:48] [SPEAKER_02]: Welcome to Two Quants and a Financial Planner, where we bridge the worlds of investing and financial planning to help investors achieve their long-term goals. Join Matt Zeigler, Jack Forehand, and me, Justin Carbonneau, as we cover a wide range of investing and planning topics that impact all of us and discuss how we can apply them in the real world to achieve the best outcomes in our financial lives.

[00:01:03] [SPEAKER_01]: Jack Forehand is a principal at Validia Capital Management. Matt Zeigler is managing director at Sunpoint Investments. The opinions expressed in this podcast do not necessarily reflect the opinions of Validia Capital or Sunpoint Investments. No information on this podcast should be construed as investment advice. Securities discussed in the podcast may be holdings of clients of Validia Capital or Sunpoint Investments.

[00:01:21] [SPEAKER_04]: So Matt, today we're going to talk about our biggest lessons from Guy Spear.

[00:01:25] [SPEAKER_03]: I mean, does it get any better than any excuse you have to go back into some Guy Spear clips and comments? It's one of those things. You listen to the guy talk and you're like, yes, yes, yes, yes, and yes. So many times about life as much as investing. So I'm stoked that we're doing this episode.

[00:01:40] [SPEAKER_04]: So this is going to be just as much Guy talking as it is us talking. So we've distilled down, we interviewed Guy in late 2022, which is actually an interesting time to interview him because you've just seen stocks and bonds go down to a level together that no one had seen in a long time.

[00:01:52] [SPEAKER_04]: And in one of the clips, he talks about this idea. But it was such a cool interview. As long as we've ever done, it's an hour and a half or hour, 35 minutes or something.

[00:02:01] [SPEAKER_04]: We've never done anything close to that. And we could have gone, you know, you'll see Guy do a three hour interview. So we could have kept going.

[00:02:05] [SPEAKER_04]: Like if we ever put you and Guy together for an interview, it might be three hours. That's considerably possible.

[00:02:11] [SPEAKER_04]: But we, yes, we've distilled it down to eight things we learned that I thought were really great lessons from the year.

[00:02:16] [SPEAKER_04]: So we're going to go through each one of these. We're going to play a clip from Guy and then we're going to talk about what we think it means for your average investor.

[00:02:23] [SPEAKER_03]: That sounds great. I'm excited to dive into these. And these are some really, really cool clips. The whole interview, phenomenal.

[00:02:28] [SPEAKER_03]: This is one I thought I might be able to just pick through and catch myself up. And I ended up plowing through the whole thing because it's so good.

[00:02:33] [SPEAKER_04]: Yeah. So this first one is great because it applies to me a lot because I've made, I guess, more than my share of mistakes over the course of my career.

[00:02:40] [SPEAKER_04]: But the part that I didn't put in the clip is Guy started his career, like I believe it was D.H. Blair.

[00:02:45] [SPEAKER_04]: So it was kind of the hardcore Wall Street type, you know, sell at any cost type environment you would think it would have been.

[00:02:52] [SPEAKER_04]: And he looked back on it as a significant mistake in his life, but he was happy he made it earlier.

[00:02:56] [SPEAKER_04]: So here's Guy talking about the idea of learning from your mistakes.

[00:02:59] [SPEAKER_00]: So I really kind of did huge damage to my reputation.

[00:03:03] [SPEAKER_00]: But I was, at the time that I joined the firm, I was 27, which is still rather old, actually.

[00:03:08] [SPEAKER_00]: You want to make your mistakes when you're like 18, 19.

[00:03:11] [SPEAKER_00]: But I was old enough to recover from it.

[00:03:13] [SPEAKER_00]: And it probably took about five, six, maybe 10 years of doing acting correctly in order to recover it.

[00:03:20] [SPEAKER_00]: So I think that, so this is like long discursive answer, but I think that for the listeners of your podcast, something that is really, really important and a huge lesson that I learned is that Wall Street, the financial markets are just jammed full of conflicts of interest.

[00:03:40] [SPEAKER_00]: And the people who work there are incredibly slick salespeople.

[00:03:46] [SPEAKER_00]: They will seek to convince the clients, the members of the public, the regulators, that they are managing all the conflicts.

[00:03:53] [SPEAKER_00]: The facts of the matter is, it's very hard to manage all the conflicts.

[00:03:58] [SPEAKER_00]: And what I kind of like in conversations with my father, I remember saying that what, well, I hope that this is not too sort of salacious, fruity language for this podcast.

[00:04:10] [SPEAKER_00]: But what D.H. Blair did with the rusty pipe, Goldman Sachs did with a very nicely lubricated object.

[00:04:20] [SPEAKER_00]: Either way, you were getting shafted, you know.

[00:04:22] [SPEAKER_00]: And so it's just a different way of being shafted.

[00:04:24] [SPEAKER_00]: So I learned to see that pattern and I learned to understand that that was the case.

[00:04:29] [SPEAKER_00]: The other thing that it did for me in no uncertain terms is it taught me that there is, I don't want to call it evil, but there are people who are not ethical in the world and there are people that I don't want to be around.

[00:04:42] [SPEAKER_00]: And so, you know, I'd never really experienced people like that.

[00:04:45] [SPEAKER_00]: And they do exist.

[00:04:46] [SPEAKER_00]: And the one thing I did know is I didn't want to be around them while I still wanted to be in finance.

[00:04:51] [SPEAKER_00]: And the other thing that I knew taught me to leave is that I discovered Warren Buffett and I knew that I wanted to be like him.

[00:04:57] [SPEAKER_00]: I had something to move away from and I had something to move towards.

[00:05:01] [SPEAKER_00]: And so I think that, you know, that taught me an awful lot sometimes.

[00:05:05] [SPEAKER_00]: And I mean, here's what I'd say to anybody who's listening to this who's in mid-career or early career.

[00:05:11] [SPEAKER_00]: Mistakes are inevitable.

[00:05:13] [SPEAKER_00]: You're going to make mistakes.

[00:05:14] [SPEAKER_00]: Mistakes.

[00:05:14] [SPEAKER_00]: So, A, be only human.

[00:05:16] [SPEAKER_00]: Don't try and be perfect.

[00:05:17] [SPEAKER_00]: But the second thing is learn from those mistakes because, boy, the worst thing you could do is have the damage of having the mistake and then knocks out of it.

[00:05:27] [SPEAKER_00]: So, you know, in my case, I wrote a book chapter on it.

[00:05:31] [SPEAKER_00]: But write reviews, write notes, develop checklists, like go over, rub your nose in your mistakes, as Charlie Munger says, and try to squeeze every bit of value out of your own mistakes.

[00:05:44] [SPEAKER_00]: And I certainly think I did that.

[00:05:47] [SPEAKER_00]: And, you know, thankfully for me, I think my career has recovered.

[00:05:51] [SPEAKER_00]: But, boy, did I take a hit.

[00:05:52] [SPEAKER_04]: I took a few things from this.

[00:05:54] [SPEAKER_04]: What is this idea?

[00:05:55] [SPEAKER_04]: I think it's really important is, like, you want your most catastrophic mistakes to the early in your career.

[00:06:00] [SPEAKER_04]: Like, as much as you don't like making the mistakes, like there were some things I did early in my career where I was like, yeah, that was probably not the greatest idea.

[00:06:07] [SPEAKER_04]: But I'm also happy that it was there.

[00:06:09] [SPEAKER_04]: Like, if you can have sort of a downward curve in your mistakes over time, I think that's probably a pretty good thing.

[00:06:16] [SPEAKER_04]: And he did that.

[00:06:17] [SPEAKER_04]: And I think he considers that D.H. Flair thing his biggest mistake.

[00:06:20] [SPEAKER_04]: And it was something he did when he was very young.

[00:06:22] [SPEAKER_03]: So this idea, and it goes back over and over again.

[00:06:24] [SPEAKER_03]: I always go to the Jesse Livermore reminiscences of a stock operator quote.

[00:06:29] [SPEAKER_03]: It's the cost of tuition.

[00:06:30] [SPEAKER_03]: That's what mistakes are.

[00:06:31] [SPEAKER_03]: They are the cost of tuition.

[00:06:33] [SPEAKER_03]: It's on you to learn something, to actually say, like, I went to college, I paid the bill, and now I learned something that I can apply forward.

[00:06:41] [SPEAKER_03]: But this is all it is.

[00:06:42] [SPEAKER_03]: It's just the cost of tuition.

[00:06:44] [SPEAKER_03]: Another sort of, like, embedded detail inside of this, he makes that almost like you got to get old enough, not just be old enough.

[00:06:50] [SPEAKER_03]: You got to get old enough to recover.

[00:06:52] [SPEAKER_03]: And that's going to take time.

[00:06:54] [SPEAKER_03]: This is, there's so many parts of this that's really important.

[00:06:57] [SPEAKER_03]: You want to give yourself the time to recover, not expect the lesson to be learned or integrated right away.

[00:07:03] [SPEAKER_03]: You might make the mistake, but then you actually need time to integrate what you learned from the mistake into the thing you're going to do next.

[00:07:11] [SPEAKER_03]: And whenever you're doing something, you can kind of gauge going into it.

[00:07:16] [SPEAKER_03]: What do I think I'm risking by making this decision?

[00:07:19] [SPEAKER_03]: And then if I'm wrong, what's the amount of time I need to afford myself to figure out what to do after?

[00:07:26] [SPEAKER_03]: There's just layers upon layers upon layers of this one.

[00:07:29] [SPEAKER_03]: And I'm right there with you.

[00:07:29] [SPEAKER_03]: And I have made so many mistakes and I keep making the mistakes now as a 40 something.

[00:07:34] [SPEAKER_03]: Or I'm like, oh, again, like another one.

[00:07:37] [SPEAKER_03]: I figured out a new way to screw this up.

[00:07:39] [SPEAKER_03]: Like, I, yeah, it'll be on my, hey, I can sing good things about my, the grandfather I just lost.

[00:07:46] [SPEAKER_03]: And two months before he passed, I was still helping the guy out of a frigging tree on a ladder with a chainsaw for a reason.

[00:07:52] [SPEAKER_03]: Go out making those mistakes.

[00:07:55] [SPEAKER_04]: So it's also interesting because a lot of times you don't know you're making the mistakes when you're making them.

[00:07:59] [SPEAKER_04]: Like, I mean, I think he eventually realized the D.H. Blair thing was a mistake.

[00:08:02] [SPEAKER_04]: And I've done things over my career, too, where you don't realize like you're making the mistake until sort of the bad ending comes.

[00:08:07] [SPEAKER_04]: Like, I don't know if I told you this story, but we had, we had a big institution we managed money for like a long time ago.

[00:08:12] [SPEAKER_04]: And we, it got up to like, we started these, these funds with like two and a half million each one.

[00:08:16] [SPEAKER_04]: And they both, they got to a cumulative billion dollars between the two of them.

[00:08:20] [SPEAKER_04]: So we were like the sub-advisor and we were managing the money.

[00:08:22] [SPEAKER_04]: And like, it was, we were, we always work from home.

[00:08:25] [SPEAKER_04]: We've always been like this small firm.

[00:08:27] [SPEAKER_04]: And we sort of took for granted the idea that we were managing money for that large of an institution without maybe, although I thought everything we did was very strong.

[00:08:36] [SPEAKER_04]: We had very, we had all the protections in our process.

[00:08:38] [SPEAKER_04]: Everything was safe, like all that stuff.

[00:08:40] [SPEAKER_04]: But the perception part of it, I mixed.

[00:08:43] [SPEAKER_04]: Like, as we went along, like the perception of you're managing a billion dollars with, you know, three guys with this firm doesn't even have an office.

[00:08:51] [SPEAKER_04]: Eventually, when the people that we were working with got replaced at that institution became a huge thing.

[00:08:55] [SPEAKER_04]: So like, I didn't even know as that was, as time was going by, we did it for a decade.

[00:09:00] [SPEAKER_04]: I didn't realize I was making a mistake, which is the mistake was we should have understood that perception.

[00:09:05] [SPEAKER_04]: And we should have been putting things in place that changed that perception over time as the funds grew.

[00:09:09] [SPEAKER_04]: So that someone who came and looked at us would be like, yeah, this is, you know, this is an institutional quality company.

[00:09:14] [SPEAKER_04]: Even if we felt like we were an institutional quality company, the appearance was that we were not.

[00:09:18] [SPEAKER_04]: And so we eventually lost that business for that reason.

[00:09:21] [SPEAKER_04]: So like, that's an example for me.

[00:09:22] [SPEAKER_04]: Like, I thought I was, you know, I thought I wasn't making a mistake at the time, but then I realized, like, in retrospect, I was and I kind of learned the lesson a little too late.

[00:09:29] [SPEAKER_03]: I love that story.

[00:09:31] [SPEAKER_03]: I love it for understanding the the appearances part of it.

[00:09:34] [SPEAKER_03]: And that's part of their decision.

[00:09:36] [SPEAKER_03]: It's the old like you can't get fired for buying IBM or whatever, which I guess maybe you can get fired for that now.

[00:09:42] [SPEAKER_03]: But it's this idea of understanding all the perspectives on this.

[00:09:47] [SPEAKER_03]: Another part that Guy brought up, I think, in this clip was kind of like the inherent conflicts of interest inside of inside of our business, which is a variation on what you're describing, where like they're trying to serve different problems, even if they don't serve the primary problem or the primary outcome.

[00:10:02] [SPEAKER_03]: Like, technically, if you're doing this and you're doing this well, no matter the size of the assets, who cares if you work from home?

[00:10:10] [SPEAKER_03]: But somebody eventually might go like, I don't like the way this works.

[00:10:12] [SPEAKER_03]: And oh, by the way, I would feel much better if this other person who I just happen to have a friend or old college roommate who lives at O'Neill.

[00:10:18] [SPEAKER_03]: I want to get them in front of the business and you working out of your home gives me the excuse to do that.

[00:10:22] [SPEAKER_03]: So another layer that I thought was interesting in Guy's point is this idea of I always look for the difference between conflict management.

[00:10:32] [SPEAKER_03]: So that's like A and B bumping heads and conflict of interest management, which is like inside of A or inside of B, there's these sub things that matter.

[00:10:41] [SPEAKER_03]: And you actually have to understand what all those layers of things that matter are.

[00:10:45] [SPEAKER_03]: And you have to address each of those, not just the things that you're butting heads over.

[00:10:49] [SPEAKER_03]: Again, just the layers inside of that, the layers inside of your story are just incredible.

[00:10:53] [SPEAKER_04]: So when we were going to do this, I emailed you and I'm like, this is basically of all the lessons episodes we've done.

[00:10:58] [SPEAKER_04]: This is in the Matt Ziegler wheelhouse.

[00:11:00] [SPEAKER_04]: And this next one kind of gets at that idea.

[00:11:02] [SPEAKER_04]: So here's Guy talking about the importance of aligning your inner and your outer self.

[00:11:06] [SPEAKER_00]: We ought to all be updating our models of the world.

[00:11:09] [SPEAKER_00]: You know, there's a wonderful piece of Jewish wisdom in my case is where I heard it first.

[00:11:15] [SPEAKER_00]: In which it's like, you know, the wise rabbis love it when we change our mind, even on important issues.

[00:11:22] [SPEAKER_00]: Because when we change our mind, that means we're alive, we're growing, we're thinking.

[00:11:26] [SPEAKER_00]: You know, we have a growth mindset.

[00:11:28] [SPEAKER_00]: We don't have a fixed mindset.

[00:11:29] [SPEAKER_00]: So I will come back to that.

[00:11:32] [SPEAKER_00]: And I can point out, I'm certain, many ways in which their thinking has evolved,

[00:11:36] [SPEAKER_00]: where things that they've done later are things that they couldn't have imagined doing earlier.

[00:11:42] [SPEAKER_00]: But I think that what enables them to sit there for as long as they do and take questions the way they do on so many different topics and feel free is that they have collapsed.

[00:11:58] [SPEAKER_00]: Most of us, one way or another, end up living our lives with one kind of a mask or another.

[00:12:04] [SPEAKER_00]: The face we present to the world is not an accurate reflection of who we are actually on the inside.

[00:12:11] [SPEAKER_00]: And what they are is, again, a lesson that I learned from Manish Pabrai.

[00:12:17] [SPEAKER_00]: They are, and I'm going to do it with my hands, they're aligned.

[00:12:20] [SPEAKER_00]: So if one side is the inside, one side is the outside, most of us are some version of this.

[00:12:24] [SPEAKER_00]: But when you become aligned, you can be the same person everywhere.

[00:12:30] [SPEAKER_00]: And that makes it easy for them to be in those meetings.

[00:12:34] [SPEAKER_00]: And because they're aligned to a genuine version of themselves, they can change their minds.

[00:12:42] [SPEAKER_00]: But they also have, and I guess their values don't change, but their thinking on a whole bunch of topics do change.

[00:12:53] [SPEAKER_00]: I think that, you know, I'll give you an example of something that I don't think has changed is that, by and large, Warren doesn't like businesses where there's a middleman.

[00:13:06] [SPEAKER_00]: So there is a theme running through so many of Berkshire's businesses where, you know, it's well known that he doesn't like to work with investment banks in buying companies.

[00:13:16] [SPEAKER_00]: He's always dealing directly.

[00:13:19] [SPEAKER_00]: And, you know, Geico is a business that doesn't work through insurance agents.

[00:13:25] [SPEAKER_00]: And Borsheim's does a lot of business by direct mail directly with the customer.

[00:13:30] [SPEAKER_00]: They don't even come into the store.

[00:13:32] [SPEAKER_00]: They call up the store and ask for what they want.

[00:13:34] [SPEAKER_00]: And there are other examples of that.

[00:13:37] [SPEAKER_00]: But then, you know, I don't remember how long ago it was that Berkshire Hathaway bought Berkshire Hathaway Home Services.

[00:13:44] [SPEAKER_00]: They were called different name at the time.

[00:13:46] [SPEAKER_00]: They're one of the largest real estate brokerages in the United States.

[00:13:50] [SPEAKER_00]: So his thinking evolved on, you know, and there's somewhere he said, you know, I'm actually OK with paying investment banking fees because I know that if I pay investment banking fees, there are deals I will see that I otherwise would not have seen.

[00:14:05] [SPEAKER_00]: So their thinking does evolve, but there are some kind of core values and principles that don't change.

[00:14:12] [SPEAKER_00]: And they're completely open about these things.

[00:14:14] [SPEAKER_04]: Yeah, this is also the inner and outer self thing is like a challenge when you do what we do, which is like we're trying and you try to be the same person, what we're doing right now, that you are when you're not doing what we're doing right now.

[00:14:23] [SPEAKER_04]: And like Buffett and he talked about Buffett and Munger and they've done a really good job of this.

[00:14:26] [SPEAKER_04]: Like they're aligned in terms of who they are publicly and what they are behind the scenes.

[00:14:31] [SPEAKER_04]: And there's so many positives in your life that come from that, because we all want to be like you have this vision of what you think people want you to be.

[00:14:38] [SPEAKER_04]: And then your outer self ends up being that vision.

[00:14:40] [SPEAKER_04]: You're like, oh, this is what people want me to be.

[00:14:42] [SPEAKER_04]: And then I think when you do more and more of this, like I was probably a lot more awkward when I started the podcast, because the more and more you do of this, you realize like the best thing you could do is just be who you are.

[00:14:53] [SPEAKER_04]: Succeed more and you're going to make better decisions.

[00:14:55] [SPEAKER_04]: You're going to do all that stuff.

[00:14:56] [SPEAKER_04]: You're kind of the same person when you're doing this public stuff that you are behind the scenes when you're out.

[00:15:01] [SPEAKER_03]: Yeah.

[00:15:01] [SPEAKER_03]: And this is just, well, it's an evergreen plug.

[00:15:04] [SPEAKER_03]: I'm not even done with the book yet, but the new Paul Miller book, the good work book, and it's literally on the cover.

[00:15:10] [SPEAKER_03]: Reclaiming your inner ambitions is part of this.

[00:15:12] [SPEAKER_03]: And the whole premise of this is this idea that the only way to do good work is to actually understand your own inner ambitions, how it aligns with your outer ambitions,

[00:15:21] [SPEAKER_03]: and not letting other people impose that outer stuff on you.

[00:15:25] [SPEAKER_03]: If you let people impose or choose for you, you can find yourself way, the way, way, way the hell out of whack in life.

[00:15:32] [SPEAKER_03]: And that's just sad.

[00:15:33] [SPEAKER_03]: We've lost less of that in the world.

[00:15:35] [SPEAKER_04]: So this next was another one that resonated with me because I've been doing a lot of it.

[00:15:38] [SPEAKER_04]: You know, I did none of it for a huge portion of my career.

[00:15:41] [SPEAKER_04]: Now I'm doing a ton of it.

[00:15:41] [SPEAKER_04]: But he's talking about this idea of learning in public.

[00:15:43] [SPEAKER_00]: It's funny because I just read an article that I'll certainly share with you.

[00:15:47] [SPEAKER_00]: It's a book chapter by a woman called Carol Dweck, and it's called The Growth Mindset.

[00:15:53] [SPEAKER_00]: Well, actually, the chapter title is called Beliefs That Make Smart People Dumb.

[00:16:00] [SPEAKER_00]: And, you know, so many of us, there's so many things in our environment that tell us, you know,

[00:16:07] [SPEAKER_00]: don't be stupid, don't look stupid, prove that you're smart.

[00:16:11] [SPEAKER_00]: And what she says in this article is if you've got a smart person who's trying to prove that they're smart,

[00:16:17] [SPEAKER_00]: they're not going to take any risks.

[00:16:19] [SPEAKER_00]: They're not going to put themselves in a situation where they can actually learn.

[00:16:23] [SPEAKER_00]: All they're going to do is put themselves into situations where they're constantly tested.

[00:16:27] [SPEAKER_00]: And the purpose of the test is not to learn.

[00:16:29] [SPEAKER_00]: It's just to prove that they're smart.

[00:16:31] [SPEAKER_00]: So, and I certainly suffer from that way more than I ought to have.

[00:16:35] [SPEAKER_00]: But in my case, you know, it's a guy called David Perel.

[00:16:41] [SPEAKER_00]: I've never met him.

[00:16:42] [SPEAKER_00]: I'm kind of envious of him because he's half my age and he's friends with all sorts of people I'd love to be friends with,

[00:16:48] [SPEAKER_00]: like Tyler Cowen, and he's interviewed all sorts of great people.

[00:16:54] [SPEAKER_00]: But he developed this idea of learning in public and he's written about it and he's certainly done YouTube videos about it.

[00:17:03] [SPEAKER_00]: And I'm sitting in lockdown and he shared something really valuable.

[00:17:09] [SPEAKER_00]: He's got a video with a guy called Matt Kobach on how to use Twitter well.

[00:17:14] [SPEAKER_00]: And he said, look, we're all being consumed by the algorithm.

[00:17:19] [SPEAKER_00]: You know, our eyeballs are the product.

[00:17:22] [SPEAKER_00]: But we can switch that around when we create in public or when we learn in public.

[00:17:28] [SPEAKER_00]: Because the minute we create content, now the algorithm is being used to connect us with people who are our special form of crazy,

[00:17:36] [SPEAKER_00]: which is exactly how we've gotten connected, actually.

[00:17:39] [SPEAKER_00]: So that was a, I kind of figured that one out.

[00:17:41] [SPEAKER_00]: And I'm sitting in lockdown and very, very difficult time for me and my family because there's plenty of evidence now about what happens to children in lockdown.

[00:17:51] [SPEAKER_00]: Children, you're going to, Jack, you're going to find out, you know, age 13, you can say what you like to them.

[00:17:57] [SPEAKER_00]: They won't even hear it.

[00:17:58] [SPEAKER_00]: All they want to do is be with their peers.

[00:18:02] [SPEAKER_00]: And, you know, I said I'm going to start experimenting with this.

[00:18:08] [SPEAKER_00]: And I do believe that I'm an introvert.

[00:18:12] [SPEAKER_00]: Or there's a huge part of me that's an introvert.

[00:18:14] [SPEAKER_00]: And all of my experience speaking in public and, you know, learning to speak in Harvard Business School classes elsewhere,

[00:18:21] [SPEAKER_00]: I don't know exactly what it was, but I decided to experiment with it.

[00:18:26] [SPEAKER_00]: And I started calling up friends.

[00:18:27] [SPEAKER_00]: And actually I used, I started using one of these.

[00:18:30] [SPEAKER_00]: I don't know if you've ever seen one of these.

[00:18:32] [SPEAKER_00]: I started recording.

[00:18:33] [SPEAKER_00]: This is a Roland 05 voice recorder.

[00:18:37] [SPEAKER_00]: It kind of records high quality voice.

[00:18:40] [SPEAKER_00]: And I started putting some of my, the conversations on SoundCloud just to see what happens, you know.

[00:18:47] [SPEAKER_00]: And I kind of worked on it from there basically.

[00:18:50] [SPEAKER_00]: I think that this world of learning in public is just exploding because I think it's only growing.

[00:18:56] [SPEAKER_00]: I don't know where it's going to go because I think the number of hours of voice recording and video recording that are being uploaded onto YouTube primarily must be growing exponentially.

[00:19:10] [SPEAKER_00]: But, I mean, I think that, you know, another thing that comes up for me, and I'm sure, I mean, I'm sure you have a similar journey that you could tell is,

[00:19:16] [SPEAKER_00]: do you really want to be a spectator or do you want to be the man in the arena?

[00:19:20] [SPEAKER_00]: And I think, was that Theodore Roosevelt?

[00:19:22] [SPEAKER_00]: You want to be the man in the arena one way or another.

[00:19:25] [SPEAKER_00]: You know, get out there.

[00:19:25] [SPEAKER_00]: That's where life happens.

[00:19:28] [SPEAKER_00]: And in a certain way, I can be grateful for lockdown because I think that it gave me the time to think about doing that.

[00:19:34] [SPEAKER_03]: First off, Carol Dweck, The Growth Mindset book is just amazing if you haven't read it.

[00:19:39] [SPEAKER_03]: It's still relevant worth reading.

[00:19:41] [SPEAKER_03]: So when I was listening to that, by the way, I knew.

[00:19:43] [SPEAKER_03]: I'm like, Matt has definitely read that.

[00:19:44] [SPEAKER_03]: Oh, yeah, I love that.

[00:19:45] [SPEAKER_03]: I love Carol Dweck stuff.

[00:19:46] [SPEAKER_03]: She's a fan.

[00:19:47] [SPEAKER_03]: So the idea of like the growth mindset versus the fixed mindset is just you're looking for things to advance yourself and advance your causes.

[00:19:55] [SPEAKER_03]: But and I think this is a really important sub lesson of this.

[00:19:59] [SPEAKER_03]: So there's this tree on like the main drag down the street from where we live.

[00:20:04] [SPEAKER_03]: And every time we drive past this tree, if my wife's in the car with me, she'll basically utter, I hate that tree.

[00:20:11] [SPEAKER_03]: And the reason she hates the tree is because it's a tree that's grown around the power lines over this main drag.

[00:20:18] [SPEAKER_03]: And so the, you know, the company, the utility company who's in charge of that stretch of road basically has cut this tree into this gigantic kind of V-shaped day.

[00:20:29] [SPEAKER_03]: But it's, you know, 20 years ago, it was like a smallish tree getting cut that way.

[00:20:34] [SPEAKER_03]: But now this tree, it is so big that it just looks like on any day, the sheer weight of the branches could just tear the thing in half.

[00:20:41] [SPEAKER_03]: It is way too big for this job.

[00:20:43] [SPEAKER_03]: Then they keep just preening to hollow out the middle of this thing.

[00:20:46] [SPEAKER_03]: And the weight just looks, it looks like a disaster waiting to have it.

[00:20:50] [SPEAKER_03]: It's going to cover the entire four lane road at something.

[00:20:52] [SPEAKER_03]: So what Guy's talking about here is you want to have a growth mindset.

[00:20:56] [SPEAKER_03]: You want to grow in alignment with whatever you're trying to achieve.

[00:21:00] [SPEAKER_03]: That's really what like compounding is all about.

[00:21:02] [SPEAKER_03]: It's fighting your North Star and then rolling towards it.

[00:21:05] [SPEAKER_03]: This tree represents how you can have a growth mindset, but not be in alignment.

[00:21:10] [SPEAKER_03]: If you're not thinking about what's the basis that's holding this frigging thing up.

[00:21:15] [SPEAKER_03]: There's all sorts of risks of if you're not aligning both what's in yourself, the trunk of that tree with your outer self, you know,

[00:21:21] [SPEAKER_03]: frigging gravity, let alone a heavy snowstorm.

[00:21:25] [SPEAKER_03]: It could bring the whole thing crashing down.

[00:21:27] [SPEAKER_03]: All the strength is figuring out how to grow and how to grow in a self-reinforcing and supported way.

[00:21:34] [SPEAKER_03]: Big, big lessons again.

[00:21:36] [SPEAKER_04]: Yeah, you know, this is hard because one of the things you do when you host a podcast like this,

[00:21:40] [SPEAKER_04]: especially when you're like the quant guy or whatever, is there's this expectation that you'll know everything.

[00:21:45] [SPEAKER_04]: That like you have all the answers and nobody has all the answers.

[00:21:48] [SPEAKER_04]: And, you know, I'm sitting and I'm sitting interviewing people who are much higher than me on the totem pole of having the answers.

[00:21:54] [SPEAKER_04]: And so like one of the things I've learned over time is you have to be willing to answer to ask the dumb question.

[00:22:00] [SPEAKER_04]: You have to be willing to say, I don't know the answer to this.

[00:22:03] [SPEAKER_04]: And that's hard to do behind the scenes.

[00:22:04] [SPEAKER_04]: Like it's hard to do when you're dealing with clients, but it's even harder to do when you're videoing yourself doing it.

[00:22:09] [SPEAKER_04]: Like because you're afraid all these people who I respect, you know, they might be listening to this podcast.

[00:22:13] [SPEAKER_04]: They're going to be like, how the hell does Janet not know that thing?

[00:22:15] [SPEAKER_04]: So like this has been a challenge for me, but the end result of it is really, really good because you get more comfortable with yourself and you get more comfortable with saying, I don't know.

[00:22:23] [SPEAKER_04]: And you get more comfortable with like saying, trying to learn something that maybe other people expect you should know.

[00:22:28] [SPEAKER_04]: So it's been a great thing for me.

[00:22:29] [SPEAKER_04]: And it's been a big lesson I've learned as we've gone through this podcast.

[00:22:34] [SPEAKER_03]: Two things.

[00:22:34] [SPEAKER_03]: First, the idea that he poses about the beliefs that make smart people look dumb.

[00:22:39] [SPEAKER_03]: Like that's just, that's a critical thing to remember.

[00:22:42] [SPEAKER_03]: But then once you understand that even smart people have beliefs that make them look dumb of all stripes and varieties, and that's saying like, we're all, we're all susceptible to this.

[00:22:52] [SPEAKER_03]: Nobody is, you know, bulletproof from having something that makes them look dumb or that is a kind of silly belief.

[00:22:58] [SPEAKER_03]: And that's a feature, not a bug.

[00:22:59] [SPEAKER_03]: But this idea of just, just don't be a spectator.

[00:23:02] [SPEAKER_03]: Get out there and do something.

[00:23:04] [SPEAKER_03]: You have to figure out what the thing is that is going to move you forward back to that growth mindset, the Carol Dweck stuff.

[00:23:11] [SPEAKER_03]: You got to figure out what that thing is that puts you on that high wire where the risk actually encourages wealth.

[00:23:17] [SPEAKER_03]: Do you, I think, I feel like maybe I've told you this story, maybe another story.

[00:23:21] [SPEAKER_03]: You know, Dean Martin, like the Rat Pack singer guy, you know, Dean Martin?

[00:23:26] [SPEAKER_04]: Yes.

[00:23:26] [SPEAKER_04]: Yes.

[00:23:27] [SPEAKER_04]: What do you ask me about that I actually do know?

[00:23:29] [SPEAKER_04]: Okay, good, good.

[00:23:29] [SPEAKER_03]: So, uh, you're familiar, have you ever watched his show, like his old variety show that he used to host, you know, forever ago?

[00:23:36] [SPEAKER_03]: Oh, it's before our life.

[00:23:36] [SPEAKER_03]: Like it was, it was a long time.

[00:23:38] [SPEAKER_03]: In videos.

[00:23:38] [SPEAKER_03]: Okay.

[00:23:38] [SPEAKER_04]: By the way, I also like the fact that I've been so bad at answering, do you know these people that you almost have to ask me, like, if I know Dean Martin, like you're like, have you heard of Michael Jordan?

[00:23:47] [SPEAKER_04]: I think that's great because I'm so horrible at knowing these people that that's a question that actually has to be asked.

[00:23:51] [SPEAKER_03]: Well, this is, and this plays directly into, you know, one of my things, ways that I can make myself look dull and look like a jerk or something.

[00:24:00] [SPEAKER_03]: So, uh, Dean Martin famously for this variety show would not rehearse.

[00:24:05] [SPEAKER_03]: So he literally wanted to like, he'd basically go out golfing, go out usually drinking.

[00:24:10] [SPEAKER_03]: You know, this is the era of like the three martini lunch.

[00:24:13] [SPEAKER_03]: And then he'd show up on set at like three o'clock or five o'clock, whatever the time was in the afternoon.

[00:24:18] [SPEAKER_03]: So it would be like, if you were coordinating anything for a sketch or a bit or whatever on the show, then you were like, oh, well, I'm ready to rehearse.

[00:24:25] [SPEAKER_03]: And it's like, where's Dean?

[00:24:26] [SPEAKER_03]: Well, Dean doesn't exactly come in until the athlete right before the camera starts.

[00:24:31] [SPEAKER_03]: He's going to walk in possibly 16 drinks in the bag.

[00:24:34] [SPEAKER_03]: And like, we're now live on down.

[00:24:36] [SPEAKER_03]: Now that may sound reckless.

[00:24:38] [SPEAKER_03]: That may sound disastrous.

[00:24:39] [SPEAKER_03]: But something that Dean Martin knew about himself was whether it was his ADHD or whatever else, he thrived in the high wire act.

[00:24:47] [SPEAKER_03]: He thrived with like the risk of failure being just this far away.

[00:24:52] [SPEAKER_03]: And he knew that the best things came out of him when he was doing that job in public, on TV, on a stage where the risk of failure was like, you just have to get through the end of this.

[00:25:01] [SPEAKER_03]: And there's no way for you to squirm out of it.

[00:25:03] [SPEAKER_03]: The strong suit was never in the preparation.

[00:25:05] [SPEAKER_03]: Strong suit was never in the rehearsal.

[00:25:06] [SPEAKER_03]: The most magic came from that last point.

[00:25:09] [SPEAKER_03]: So you learn in public, but you also have to learn in yourself, learn about yourself enough, that interview thing that you can go, how do I now put myself in public doing it in the way that I get the most out of it or has the highest value?

[00:25:23] [SPEAKER_03]: Those are profound lessons to learn.

[00:25:25] [SPEAKER_03]: And I mean, I love that if it weren't for you putting yourself out there to do this and then me going, hey, Jack, how do you do this?

[00:25:31] [SPEAKER_03]: I wouldn't be here either.

[00:25:32] [SPEAKER_03]: So I think you're setting a pretty good example.

[00:25:34] [SPEAKER_04]: This is funny.

[00:25:35] [SPEAKER_04]: Like, I am certainly the furthest thing from Dean Martin on the other side of it.

[00:25:37] [SPEAKER_04]: But the same thing has been true with me.

[00:25:39] [SPEAKER_04]: Like, there was, I may have told the story in the podcast or not.

[00:25:41] [SPEAKER_04]: Like, there was, our first, like, really big name interview was Rob Arnott.

[00:25:45] [SPEAKER_04]: And so we got on to do the interview.

[00:25:46] [SPEAKER_04]: And, you know, when you have an interview with a big name guest, like, you have an hour of their time.

[00:25:50] [SPEAKER_04]: Like, they're not going to sit around.

[00:25:51] [SPEAKER_04]: They're always very polite and respectful.

[00:25:53] [SPEAKER_04]: And Rob is awesome.

[00:25:54] [SPEAKER_04]: But, like, they're scheduled, packed, back to back.

[00:25:56] [SPEAKER_04]: So, like, you're done at the end.

[00:25:57] [SPEAKER_04]: Like, so they're not going to sit around for 15 minutes while you work out your technical issues.

[00:26:01] [SPEAKER_04]: It's just not the way it works.

[00:26:02] [SPEAKER_04]: So Justin had no, Justin couldn't figure out something with his earphones or something.

[00:26:05] [SPEAKER_04]: So he couldn't hear.

[00:26:07] [SPEAKER_04]: So we'd prepare to do the interview together.

[00:26:09] [SPEAKER_04]: And, like, Justin's like, all right, I got to go.

[00:26:11] [SPEAKER_04]: I'm going.

[00:26:12] [SPEAKER_04]: And so, like, it's just me and Rob Arnott.

[00:26:13] [SPEAKER_04]: And I'm like, oh, no.

[00:26:14] [SPEAKER_04]: This is, yeah, total of the history.

[00:26:16] [SPEAKER_04]: Like, how am I possibly going to pull off this interview?

[00:26:18] [SPEAKER_04]: And, like, I think it came out okay.

[00:26:20] [SPEAKER_04]: So it was, like, I think I found something about myself in that, too.

[00:26:23] [SPEAKER_04]: Like, I was able to, like, the pressure of it almost, like, turned into a positive fin.

[00:26:27] [SPEAKER_04]: And I was able to get through the interview.

[00:26:29] [SPEAKER_04]: This is very early in the podcast.

[00:26:30] [SPEAKER_04]: And I think I probably learned something about myself doing that.

[00:26:33] [SPEAKER_04]: And I still have that, especially when we do the big name guests.

[00:26:35] [SPEAKER_04]: Like, we've got some bigger names coming up soon.

[00:26:37] [SPEAKER_04]: And, like, I'll always be a little bit nervous going into them.

[00:26:39] [SPEAKER_04]: But then, like, you get in the moment of the thing and it's fine.

[00:26:43] [SPEAKER_03]: Nothing can be further, further, closer to the truth than just remembering.

[00:26:46] [SPEAKER_03]: You don't have to be an on of everyone.

[00:26:48] [SPEAKER_03]: Like, you can actually go at the end of the day, like, Rob Arnott is still just a guy.

[00:26:52] [SPEAKER_03]: He might not hang out with you before or after the interview.

[00:26:55] [SPEAKER_03]: But he's still just a guy.

[00:26:56] [SPEAKER_03]: And the conversation is going to be better when you treat them as such.

[00:27:00] [SPEAKER_03]: And, Jack, I mean, come on.

[00:27:02] [SPEAKER_03]: You're truly the Dean Martin of Excess Returns.

[00:27:05] [SPEAKER_03]: To Justin Carbino's friend, Sinatra.

[00:27:08] [SPEAKER_03]: I'll let you decide who I get to be.

[00:27:10] [SPEAKER_04]: So this next one is one we talked about in the Chris Davis episode as well.

[00:27:14] [SPEAKER_04]: There's this idea of trying to fold on to your winners.

[00:27:18] [SPEAKER_04]: And it's something we all struggle with.

[00:27:19] [SPEAKER_04]: And I love when we talk to a lot of great investors who say they also struggle with it.

[00:27:22] [SPEAKER_04]: So here's Guy talking about that idea.

[00:27:24] [SPEAKER_00]: Yeah, it's a really powerful idea.

[00:27:26] [SPEAKER_00]: And I get the opportunity here to debunk and correct a mistake that I've made elsewhere.

[00:27:33] [SPEAKER_00]: So in the past, talking about this idea, I've cited a study that doesn't exist.

[00:27:40] [SPEAKER_00]: And it's a kind of story that gets repeated.

[00:27:44] [SPEAKER_00]: It's a study supposedly that was done at Fidelity in which they looked at dead people's portfolios.

[00:27:51] [SPEAKER_00]: And they discovered that dead people's portfolios did better than live people because dead people didn't rebalance and do all of those things.

[00:28:02] [SPEAKER_00]: So then, you know, I say this somewhere.

[00:28:04] [SPEAKER_00]: And this is a great advantage of learning.

[00:28:06] [SPEAKER_00]: Probably somebody writes to me and says, that is not a true story.

[00:28:08] [SPEAKER_00]: I'm like, really?

[00:28:09] [SPEAKER_00]: I've heard it so many times.

[00:28:10] [SPEAKER_00]: They say, yeah, it's an old wives tale, something like that.

[00:28:14] [SPEAKER_00]: It's scary.

[00:28:15] [SPEAKER_00]: Sorry.

[00:28:17] [SPEAKER_00]: So Schiller, Robert Schiller is a professor at Harvard University, and he has talked about narrative economics.

[00:28:24] [SPEAKER_00]: And what he talks about there is how stories can have a viral aspect to them and stories that are not even true and have a viral aspect to them.

[00:28:34] [SPEAKER_00]: So why am I bringing that up?

[00:28:35] [SPEAKER_00]: Because, you know, I just want to debunk that is not a true story.

[00:28:39] [SPEAKER_00]: But the basic principle encapsulated in that story, in this case, happens to be true, I believe, or I can think is provably true, is that if you take a random portfolio and hold it for a very long time, you know, take out of X stocks in the S&P, take a random 20 names, allocate 5% of your theoretical portfolio to them, and then hold them for a very long time.

[00:29:04] [SPEAKER_00]: And you'll get some big winners, a lot of things that do nothing, and then you'll get some big losers.

[00:29:10] [SPEAKER_00]: And the majority of your returns will result from your big winners.

[00:29:15] [SPEAKER_00]: And the question that arises, if that is the case in a passive portfolio that is selected once, every time I intervene in the portfolio, I'm going to be paying transaction costs of one form or another.

[00:29:26] [SPEAKER_00]: And I need to ask myself, how likely is it that the intervention that I'm going to make is going to outweigh this basic principle that a few winners are going to carry the portfolio forward?

[00:29:38] [SPEAKER_00]: And I think that the odds are against you.

[00:29:41] [SPEAKER_00]: You need to see overwhelming odds to make a move.

[00:29:44] [SPEAKER_00]: You might have overwhelming odds.

[00:29:46] [SPEAKER_00]: You might have clear evidence that a company is about to go bankrupt.

[00:29:49] [SPEAKER_00]: You should take every single penny off the table.

[00:29:51] [SPEAKER_00]: But the standard for behaving needs to be very, very high.

[00:29:55] [SPEAKER_00]: It needs to be more than just, I'm rebalancing my portfolio, in my humble opinion.

[00:30:00] [SPEAKER_00]: Another idea there that is really fascinating, and forgive me if you and or your listeners' audience don't know Berkshire Hathaway as well as I do,

[00:30:11] [SPEAKER_00]: but Berkshire Hathaway is well known for being this conglomerate that has all these different businesses in it.

[00:30:17] [SPEAKER_00]: But actually the companies that carry the vast majority of the intrinsic value of Berkshire Hathaway,

[00:30:25] [SPEAKER_00]: a small proportion of the total numbers of businesses that Berkshire Hathaway has bought.

[00:30:29] [SPEAKER_00]: So the same principle applies within Berkshire Hathaway, probably implies within many different businesses.

[00:30:35] [SPEAKER_00]: So it's just, you know, the principle, if I just pause and self-reflect, you know,

[00:30:43] [SPEAKER_00]: that principle that I'm enunciating is very simple to talk about and demonstrate.

[00:30:48] [SPEAKER_00]: Far more difficult is to actually act in such a way that you don't rebalance the portfolio,

[00:30:56] [SPEAKER_00]: because it can be painful, you know?

[00:30:58] [SPEAKER_00]: You see a stock go up five times, and then it goes down by 50%.

[00:31:03] [SPEAKER_00]: You know, it's like, shoot, that's painful.

[00:31:07] [SPEAKER_00]: Actually, how many charts have we looked at of companies from this most recent era that went up 10, 20, 100 times,

[00:31:14] [SPEAKER_00]: and now they're down 90%, and guess what?

[00:31:17] [SPEAKER_00]: They ain't ever going back.

[00:31:18] [SPEAKER_00]: So which one of them do I own, you know?

[00:31:21] [SPEAKER_04]: So there's two things in this I want to talk about.

[00:31:22] [SPEAKER_04]: First of all, this fidelity study.

[00:31:24] [SPEAKER_04]: I don't know if you know about this, but, like, where did this thing come from?

[00:31:27] [SPEAKER_04]: Like, I've quoted this to a million people.

[00:31:28] [SPEAKER_04]: I've been like, oh, it's because it's the greatest study of all time if you want to make a certain point.

[00:31:32] [SPEAKER_04]: It's like the perfect study.

[00:31:34] [SPEAKER_04]: Did it never exist?

[00:31:35] [SPEAKER_04]: I don't even know.

[00:31:36] [SPEAKER_04]: I mean, do you know where it came from?

[00:31:37] [SPEAKER_04]: I think it's been debunked now, but, like, where did the idea even come from?

[00:31:42] [SPEAKER_03]: This one still, like, when people say it, I'm like, are you sure?

[00:31:46] [SPEAKER_03]: Like, when people are like, it's a myth.

[00:31:49] [SPEAKER_03]: And we're referencing the fidelity study where supposedly they found people with debt accounts had, like, better track records.

[00:31:55] [SPEAKER_03]: So basically people who died and never logged into their account, but fidelity hadn't purged them from the system or found their estate beneficiaries or whatever,

[00:32:04] [SPEAKER_03]: those accounts performed better than people who were alive.

[00:32:07] [SPEAKER_03]: I think that was the initial point.

[00:32:08] [SPEAKER_03]: That is correct.

[00:32:09] [SPEAKER_03]: So theoretically, and this myth has been my entire career, when I didn't know it was a myth until, I feel like, just a couple of years ago, maybe less.

[00:32:19] [SPEAKER_03]: And my brain still hurts because I'm like, I feel like I had it on very good authority that this is surreal.

[00:32:24] [SPEAKER_03]: And talk about, like, smart people believing dumb things.

[00:32:29] [SPEAKER_03]: I mean, I never really, I never went and found the initial study.

[00:32:32] [SPEAKER_03]: Did you?

[00:32:33] [SPEAKER_03]: Like, does it not even exist?

[00:32:34] [SPEAKER_03]: Is this just a wives' tale spun by finance?

[00:32:37] [SPEAKER_04]: We need to ask.

[00:32:38] [SPEAKER_04]: I don't think it exists.

[00:32:39] [SPEAKER_04]: I mean, this is something we need to ask Daniel Cross because he probably knows.

[00:32:41] [SPEAKER_04]: Like, he would probably know where this actually came from and whether there was anything to it.

[00:32:45] [SPEAKER_04]: I mean, I don't think there was actually ever even a study.

[00:32:46] [SPEAKER_04]: I mean, it seems like somebody either made it up completely or maybe there was some other study that they took the wrong thing from.

[00:32:52] [SPEAKER_04]: I don't know.

[00:32:53] [SPEAKER_04]: But, like, something like that because that is the perfect thing.

[00:32:55] [SPEAKER_04]: If you want to teach people that, like, sitting on your hands and doing nothing is the best thing in investing, like, you couldn't come up with a better study than dead people outperforming everybody else.

[00:33:03] [SPEAKER_04]: So it was, like, the perfect thing.

[00:33:05] [SPEAKER_04]: And, like, all of us lashed onto it because it was the perfect thing to make the point we wanted to make.

[00:33:08] [SPEAKER_04]: And I don't think any of us ever bothered to go, like, where is the study?

[00:33:11] [SPEAKER_04]: If I read the actual study.

[00:33:13] [SPEAKER_03]: Yeah, I don't know.

[00:33:15] [SPEAKER_03]: I just did a quick Snopes check and somewhere between if Colonel Sanders left money to the KKK and if the Postal Service suspended all services in Pennsylvania, Ohio, with apparently Fidelity must have held the money for these things.

[00:33:27] [SPEAKER_03]: I don't further know.

[00:33:28] [SPEAKER_03]: But I don't know.

[00:33:30] [SPEAKER_03]: If anybody listening to this knows about the history of the Fidelity study, we've got to email our old friend Crosby and ask if he knows.

[00:33:37] [SPEAKER_03]: My brain is just broken by this.

[00:33:40] [SPEAKER_04]: So, and the other thing is, to the actual point of what he was talking about, like, I like the idea here.

[00:33:44] [SPEAKER_04]: He talked about having a high standard for making changes in a portfolio.

[00:33:48] [SPEAKER_04]: And this gets to the idea of holding winners because, like, if you're making changes for, you know, small reasons or for, you know, the valuations a little bit more than I think it should be, you can get into trouble with this stuff.

[00:33:59] [SPEAKER_04]: Whereas if you say, like, I'm going to do nothing and I want to have a high standard for when I'm going to make a change.

[00:34:04] [SPEAKER_04]: I think that does help with the idea of holding winners because the winner gets a little bit expensive relative to what you think your value criteria is.

[00:34:11] [SPEAKER_04]: You're like, you know what?

[00:34:11] [SPEAKER_04]: I don't really need to trim it now.

[00:34:12] [SPEAKER_04]: It's a little bit expensive.

[00:34:13] [SPEAKER_04]: You're going to do a better job, I think, of holding winners if you have a high standard for when you are going to make a change.

[00:34:18] [SPEAKER_03]: And speaking to that high standard, how salient is his point that both Professor Schiller and Professor Demeteron are like two valuation experts to the world, have both now authored books on how powerful narratives are to all these things.

[00:34:35] [SPEAKER_03]: It will just never end, never endingly mess you up with how you think about this stuff, too.

[00:34:40] [SPEAKER_03]: But just stepping back for the quants and the people who think philosophically about this stuff, two of our vanguard level thinkers have both said narrative impacts all this stuff in profound ways.

[00:34:51] [SPEAKER_03]: And it's beyond the magic that exists in our spreadsheets.

[00:34:54] [SPEAKER_04]: Yeah, one of the biggest things I've learned in my career.

[00:34:56] [SPEAKER_04]: And, you know, we've been lucky enough to be friends with Dan Hunt, who's really helped hammer home that point for us of how important narrative is.

[00:35:02] [SPEAKER_04]: So moving on to the next one, because we're a little bit behind, as we always are when we do these things.

[00:35:06] [SPEAKER_04]: And that's this idea.

[00:35:08] [SPEAKER_04]: Here's Guy talking about the idea of a circle of confidence.

[00:35:10] [SPEAKER_00]: Everybody says having a well-defined circle of competence.

[00:35:13] [SPEAKER_00]: And how do you decide there's something in your circle of competence or not, you know?

[00:35:17] [SPEAKER_00]: And you buy something.

[00:35:18] [SPEAKER_00]: I buy something I think that's totally in my circle of competence.

[00:35:21] [SPEAKER_00]: And then it goes down by an endless amount.

[00:35:23] [SPEAKER_00]: And I say, well, is it actually in my circle of competence, you know?

[00:35:26] [SPEAKER_00]: I think that it's really, really hard.

[00:35:28] [SPEAKER_00]: And we live in an uncertain world.

[00:35:30] [SPEAKER_00]: We have far less than full information.

[00:35:33] [SPEAKER_00]: We're getting samples of the data that's out there.

[00:35:36] [SPEAKER_00]: And somehow we have to both make decisions on the portfolio that we manage and we have to update the models of the world in which we live.

[00:35:45] [SPEAKER_00]: And I don't have any easy or good answers to that.

[00:35:51] [SPEAKER_00]: But I think that keeping a diary, so writing stuff down so that we can remember who we were then is helpful.

[00:36:00] [SPEAKER_00]: I think that, you know, I'm going to try and share something with you now that when I try and share it with my CFO, he kind of like, he rolls his eyes.

[00:36:12] [SPEAKER_00]: But it's a really powerful idea.

[00:36:14] [SPEAKER_00]: And if you know, what's his first name?

[00:36:18] [SPEAKER_00]: Michael Mobison.

[00:36:19] [SPEAKER_00]: Michael.

[00:36:19] [SPEAKER_00]: Michael, forgive me.

[00:36:21] [SPEAKER_00]: You're a huge figure in my life.

[00:36:22] [SPEAKER_00]: I should know your first name.

[00:36:25] [SPEAKER_00]: But it's, so there's a guy called Ole Peters who's also part of the Santa Fe Institute.

[00:36:31] [SPEAKER_00]: And he's written about an idea called ergodicity.

[00:36:34] [SPEAKER_00]: And I'm going to try and explain how it applies to investing.

[00:36:39] [SPEAKER_00]: And so, you know, if I could divide myself up into, any one of us could divide ourselves up into, you know, a thousand different versions of myself.

[00:36:54] [SPEAKER_00]: And now we could kind of like follow through what happens to my portfolio in each one of those.

[00:37:03] [SPEAKER_00]: And I get the aggregate of all of those thousand different versions of myself 20 years on.

[00:37:10] [SPEAKER_00]: I can expect some kind of an outcome based on what kind of risks and decisions I make.

[00:37:18] [SPEAKER_00]: But I cannot do that.

[00:37:20] [SPEAKER_00]: I cannot divide myself into 1,000 different versions of myself.

[00:37:26] [SPEAKER_00]: I have to take one path through the future.

[00:37:29] [SPEAKER_00]: And I can only pick one of those paths.

[00:37:32] [SPEAKER_00]: And out of a certain kind of behavior, you know, you can have a very broad distribution of outcomes for those thousand different versions of yourself.

[00:37:43] [SPEAKER_00]: Where if you average them out at the end, you'll do fine.

[00:37:46] [SPEAKER_00]: But, you know, imagine that we're talking about Russian roulette.

[00:37:50] [SPEAKER_00]: Or, no, let's take another example.

[00:37:54] [SPEAKER_00]: Let's just say that I'm a guy who's playing the odds on a roulette table.

[00:37:59] [SPEAKER_00]: But in this roulette disc, the odds are slightly in my favor, but only slightly in my favor.

[00:38:05] [SPEAKER_00]: You know, that might be a game that in, you know, 55% of the outcomes, I win huge.

[00:38:13] [SPEAKER_00]: But in 20% of the outcomes, I go bankrupt.

[00:38:17] [SPEAKER_00]: And that's, you know, so on the average, I'll do great.

[00:38:20] [SPEAKER_00]: But I have 20% of the outcomes where I actually lose everything.

[00:38:26] [SPEAKER_00]: And that's just not an acceptable outcome.

[00:38:28] [SPEAKER_00]: That is not.

[00:38:29] [SPEAKER_00]: So what is my point?

[00:38:32] [SPEAKER_00]: We have to look at our lives.

[00:38:35] [SPEAKER_00]: We have to be careful to realize that we are not the average of all the possible outcomes of the expected value.

[00:38:42] [SPEAKER_00]: Because there are outcomes of how we behave with our portfolio that could take us to zero.

[00:38:50] [SPEAKER_00]: And then there's no recovery.

[00:38:51] [SPEAKER_00]: And then we don't get the benefit of all those positive outcomes.

[00:38:56] [SPEAKER_00]: I don't know if I'm making any sense.

[00:38:58] [SPEAKER_00]: What's my point?

[00:38:59] [SPEAKER_00]: And when we're deciding what's our circle of competence, when we're deciding our investments,

[00:39:05] [SPEAKER_00]: I think that to be aware of the idea that there's no recovery, for example, from a complete loss.

[00:39:10] [SPEAKER_00]: If you have a very significant loss, the ability to climb back from that is increasingly difficult.

[00:39:16] [SPEAKER_00]: So you may not take the path that has the highest expected outcome.

[00:39:23] [SPEAKER_00]: Because if you get that improbable but possible, very negative outcome that's unrecoverable, you don't want to live that path.

[00:39:31] [SPEAKER_00]: So you need to cut that path out by having a different strategy, if you like.

[00:39:35] [SPEAKER_00]: So in terms of circle of competence, you kind of like, and just to try and actually answer your question rather than just ramble.

[00:39:44] [SPEAKER_00]: It's trying to figure out how do I decide my circle of competence in such a way that I rule out those versions of the world or those versions of me that will hit rock bottom.

[00:39:56] [SPEAKER_04]: Yeah, this is really interesting to me because there's this balance with the circle of competence.

[00:39:59] [SPEAKER_04]: There's an idea.

[00:40:00] [SPEAKER_04]: The idea of a circle of competence is right.

[00:40:02] [SPEAKER_04]: Like, I don't want to be investing anything in things that I don't understand.

[00:40:05] [SPEAKER_04]: Like, I want to stay inside of my circle of competence.

[00:40:07] [SPEAKER_04]: But there's this trap of, here is my circle of competence.

[00:40:10] [SPEAKER_04]: It's never going to change.

[00:40:12] [SPEAKER_04]: And suddenly, I can't buy Apple or I can't buy anything as Buffett because, you know, it's a technology company and I don't understand technology companies.

[00:40:18] [SPEAKER_04]: There's a point where technology companies become much more understandable.

[00:40:22] [SPEAKER_04]: And I think Buffett will even talk about, obviously, he made up for it with buying Apple because he did so well with it.

[00:40:26] [SPEAKER_04]: But he'll even talk about that as a mistake in his career is he was, it probably took him too long to say, like, these technology companies are outside of my circle of competence and to, you know, look at them as something he could invest in.

[00:40:37] [SPEAKER_03]: I like to think of, and I like to explain circle of competence because this is another one of those where people want to quote the Buffett thing or whatever else and try to sometimes apply it to themselves.

[00:40:47] [SPEAKER_03]: Or it gets misapplied in that, like, misapplied Peter Lynch framework of, like, buy what you know.

[00:40:52] [SPEAKER_03]: And it's like, well, do you really know it?

[00:40:53] [SPEAKER_03]: Is this really your competence or just, like, the place that you shop at?

[00:40:56] [SPEAKER_03]: This whole thing.

[00:40:57] [SPEAKER_03]: So I like to think about this as the circle of competence is you're literally trying to draw a circle around the things that you definitively know.

[00:41:04] [SPEAKER_03]: And then the goal is once you've understood that circle, extra Buffett, you want to compel.

[00:41:09] [SPEAKER_03]: You want to roll the snowball inside the circle.

[00:41:12] [SPEAKER_03]: What you don't want to do is, like, start the snowman in your front yard.

[00:41:15] [SPEAKER_03]: You start rolling the snowball over and then you roll out into the road where all, like, the salt, rock salt and stuff and sand is.

[00:41:21] [SPEAKER_03]: And you try to roll that up because that's going to, that's not going to help you roll that snowball.

[00:41:25] [SPEAKER_03]: It's not going to help you compound.

[00:41:27] [SPEAKER_03]: You have to really understand what the limits, what the boundaries of that circle are and then try to compound inside of it.

[00:41:34] [SPEAKER_03]: Way, way, way easier said than done.

[00:41:35] [SPEAKER_03]: But a really useful mental model for thinking, how do I understand this thing and how do I make sure I'm inside the confines of the boundary when I'm trying to do stuff that compounds over time?

[00:41:46] [SPEAKER_04]: And the other one for me was this ergo-sodicity thing, which, by the way, I've always wanted to say in a podcast.

[00:41:50] [SPEAKER_04]: So I'm very impressed with myself now that I did.

[00:41:52] [SPEAKER_04]: Yes.

[00:41:53] [SPEAKER_04]: Again, like, it's going to be great.

[00:41:56] [SPEAKER_04]: Like, I asked Claude to define it because I always have trouble defining it.

[00:41:59] [SPEAKER_04]: And it was like, he gave me, like, this 14-page thing and I'm afraid.

[00:42:01] [SPEAKER_04]: I'm like, can you give it to me simply?

[00:42:03] [SPEAKER_04]: And couldn't even do that.

[00:42:04] [SPEAKER_04]: But anyway, I think the way I look at it is this idea that we don't experience average when we, like, experience light over time is kind of the way I look at it.

[00:42:12] [SPEAKER_04]: And so, like, if within these averages there's, like, I went bankrupt or I went broke, then the average doesn't mean anything to me.

[00:42:19] [SPEAKER_04]: Because I went broke along the way, so I don't get the average.

[00:42:22] [SPEAKER_04]: And so I think you can maybe define it better than me, but it's this idea that in certain situations like this, you don't get the average in your life.

[00:42:28] [SPEAKER_04]: You've got to look at these worst-case scenarios because they blow up the average and the average doesn't really impact you.

[00:42:34] [SPEAKER_03]: And I said Nassim Taleb not in jest because I think he's probably one of the places where I imagine that's where Mobison got it from.

[00:42:42] [SPEAKER_03]: He was one of the first people.

[00:42:43] [SPEAKER_03]: You need somebody who understands, like, option theory to explain this to you the first time so you can be thoroughly confused and want to drop it to Sound Sword on the Podcasts.

[00:42:49] [SPEAKER_03]: But this idea, Luca Delana actually has the best book on this.

[00:42:53] [SPEAKER_03]: If you haven't read the Luca Delana book, that was like the, I feel like I got way closer to actually understanding a more scientific concept after reading his thing about it.

[00:43:03] [SPEAKER_03]: So it's just this idea of what you said.

[00:43:05] [SPEAKER_03]: Like, you can understand averages and it's kind of the difference between if I have 100 people in a room, I hand them all quarters, I say everybody flip it, heads or tails, all at once, we're going to get close to a 50-50 distribution.

[00:43:17] [SPEAKER_03]: And it's like, okay, if everybody does this all at once, this is the statistical outcome I can expect.

[00:43:22] [SPEAKER_03]: However, if I go down the row of all 100 people and make them flip one at a time and take note on each, I might have a streak of 10 heads in a row.

[00:43:30] [SPEAKER_03]: I might have a streak of 20 tails in a row.

[00:43:32] [SPEAKER_03]: There's lots of weird paths we might get to that 50-50 outcome on average at the end.

[00:43:37] [SPEAKER_03]: And it's just understanding that there's a difference between looking at the entire class and a statistical sample on all the realized things all at once versus broken out over time.

[00:43:46] [SPEAKER_03]: And you got to think that way when you're thinking about compounding or how results just highly unfold in the real world.

[00:43:52] [SPEAKER_03]: Super useful thing.

[00:43:54] [SPEAKER_04]: Right. So if you see that, that was a great example, because if you look at all those people flipping that coin, if you look at it in a different way and say, I'm going to flip the coin 10 times.

[00:44:01] [SPEAKER_04]: But when I get tails, I'm going to be bankrupt.

[00:44:03] [SPEAKER_04]: Well, then it doesn't matter to me that it's 50-50 or that the average will probably be 50-50 because I'm going to hit the bankrupt somewhere along those 10 times and I'm going to be bankrupt.

[00:44:11] [SPEAKER_03]: Yeah, I won't embarrass myself in trying to remember that it's killing me because I think the book is on the shelf right behind me.

[00:44:16] [SPEAKER_03]: But in Luca's book, he gives an example of like basically skiing.

[00:44:20] [SPEAKER_03]: And it's like if you're skiing and there's like disparate trees there, there's lots of ways to avoid the trees every time.

[00:44:26] [SPEAKER_03]: But if you want to go like skiing through the woods, like your odds of if you hit that tree at full force going down, like the outcome is really, really bad.

[00:44:34] [SPEAKER_03]: And you want to make those choices around if there is a risk of failure.

[00:44:38] [SPEAKER_03]: Is it a big failure or a small failure?

[00:44:41] [SPEAKER_04]: So this next one, we're going to do two more.

[00:44:42] [SPEAKER_04]: This next one is one that I've learned a lot about throughout my career.

[00:44:45] [SPEAKER_04]: So he's talking about the idea of having the right investors on board with you.

[00:44:48] [SPEAKER_00]: Tell you there is it goes even one step further, which because my experience is that everybody is a long-term investor until the preventer.

[00:44:57] [SPEAKER_00]: And they're not, you know, and you kind of say, well, you said these things to me three years ago.

[00:45:01] [SPEAKER_00]: Like what happened?

[00:45:02] [SPEAKER_00]: They're like, yeah, well, I didn't expect the pandemic.

[00:45:04] [SPEAKER_00]: I didn't expect the war with Ukraine.

[00:45:06] [SPEAKER_00]: I'd expect them to raise interest rates.

[00:45:08] [SPEAKER_00]: And I'm scared and I just want out.

[00:45:10] [SPEAKER_00]: And so the way to do it is not so much by asking questions because people think they know what they want and they think they know their orientation, but they don't.

[00:45:19] [SPEAKER_00]: It's through actually the structure of what you do.

[00:45:22] [SPEAKER_00]: So, for example, you know, we recently brought on in the fund that I manage a five-year share class.

[00:45:29] [SPEAKER_00]: The five-year share class doesn't charge management fees.

[00:45:32] [SPEAKER_00]: I should be careful because I may be violating securities rules, but forget about my fund because I'm not allowed to make an offer in public.

[00:45:41] [SPEAKER_00]: But rather than ask the investor questions that they can walk away from, bake it into investment, if you like.

[00:45:51] [SPEAKER_00]: And, you know, private equity funds do that.

[00:45:55] [SPEAKER_00]: And private equity funds you committed often, I think, for five at least years, often ten years, you know.

[00:46:00] [SPEAKER_00]: And then the ultimate, I would tell you, that I still aspire to is where you never have to send the money back because it belongs to you or the investment vehicle, which is what Berkshire Hathaway has.

[00:46:13] [SPEAKER_00]: You know, if investors get scared, they can sell the shares, but they can't ask for a redemption of their funds from Berkshire Hathaway.

[00:46:20] [SPEAKER_04]: Yeah, you know, I think this is, to me, this is more important than a lot of things.

[00:46:23] [SPEAKER_04]: It's more important than the strategies you run in a lot of ways.

[00:46:26] [SPEAKER_04]: It's more important than a lot of the stuff you're doing behind the scenes.

[00:46:28] [SPEAKER_04]: Like, Wes Gray does a really good job of this.

[00:46:30] [SPEAKER_04]: Like, the idea is you want people who are going to stick with you and stick with what you're doing.

[00:46:35] [SPEAKER_04]: And part of doing that is they have to understand what it is you're doing and they have to understand both the good and the bad side of what you're doing.

[00:46:41] [SPEAKER_04]: And so when you listen to Wes be interviewed about, like, investing in, like, his value ETF, he is going to, at some point in that interview,

[00:46:48] [SPEAKER_04]: tell you about all the horrible, awful things that are going to happen to you if you hold a value ETF for a very long period of time,

[00:46:54] [SPEAKER_04]: particularly a concentrated value ETF, which is, like, what he's running.

[00:46:57] [SPEAKER_04]: But that's so, so important because when you expect that, when you understand that going in,

[00:47:03] [SPEAKER_04]: you're more likely not to get on board if you're not the right person to be on board.

[00:47:07] [SPEAKER_04]: And so this is something I've learned a ton because we, you know, we run focus factor strategies as well.

[00:47:11] [SPEAKER_04]: And we've had a lot of people who have gotten on board over the years who we should never have let on board in the first place.

[00:47:16] [SPEAKER_04]: But, like, I think this has been a huge lesson for my career.

[00:47:20] [SPEAKER_03]: I know that I'm quoting a really deep intellectual resource in this, but I think it's one of those recurrent patterns of my entire career that I think about and talk about all the time

[00:47:30] [SPEAKER_03]: because it's just I'm yet to have this anecdotally proven untrue in some way.

[00:47:35] [SPEAKER_03]: There's a great Looney Tunes episode.

[00:47:37] [SPEAKER_03]: I can't remember what it's called.

[00:47:39] [SPEAKER_03]: I need to find it so I can properly cite this thing.

[00:47:41] [SPEAKER_03]: But in this episode of Looney Tunes, you're basically seeing all their pets and their owners and they all look the same.

[00:47:47] [SPEAKER_03]: Does this ring a slight bell with you at all from your childhood?

[00:47:50] [SPEAKER_03]: The premise is like the guy walking the dog and they both have a similar type nose and posture.

[00:47:55] [SPEAKER_03]: And it's just it's just this theme that, like, the pets look like the owners.

[00:48:00] [SPEAKER_03]: And I think about this with whether it's with funds or whether this is with advisors or even accountants or attorneys or any profession.

[00:48:07] [SPEAKER_03]: We tend to gravitate towards people who may not physically look like us, but approach the world in some way that we do, because the only way that those relationships can stand the test of time through the ups and downs is if there's enough stuff that just inherently rhymes that you can go like, OK, I can I can survive this if you can survive this with me.

[00:48:26] [SPEAKER_03]: And when you see people like Wes literally talking about the value pain train in ad nauseum of horrible, horrifying DJing is and then you still like, well, the funds still have assets.

[00:48:37] [SPEAKER_03]: You can rest assured a lot of those people share that same belief.

[00:48:40] [SPEAKER_03]: There's a lot of pets that look like that owner inside of that construct.

[00:48:45] [SPEAKER_03]: I stress it all the time in my professional work and with everybody else.

[00:48:48] [SPEAKER_03]: It's like, yeah, you should work with people you like.

[00:48:50] [SPEAKER_03]: You should work with people that like you not saying you need to be friends with them.

[00:48:54] [SPEAKER_03]: But I am saying you're looking for those, not just the core beliefs that clearly and obviously rhyme, but also the things a few levels deep where you're just like, do we kind of think about life the same way?

[00:49:04] [SPEAKER_03]: Because it's going to be a lot easier to have hard conversations when you have those underground things that are on board with each other.

[00:49:10] [SPEAKER_04]: Yeah. And Wes has the hardest job of doing it, because the easier it is for someone to liquidate whatever it is you're doing, the harder it is to do this.

[00:49:16] [SPEAKER_04]: Because like if you're running a hedge fund and people can't get out of the hedge fund for a period of time, like it's possible the pain will pass by the time they can even make a decision.

[00:49:23] [SPEAKER_04]: Like with an ETF, it's every single day they can click a button and it's over for you.

[00:49:26] [SPEAKER_04]: So that's the hardest, most extreme case.

[00:49:29] [SPEAKER_04]: And that's probably why he's so public about this stuff is he really has to be careful about making sure the people who get on board really understand what they're getting.

[00:49:36] [SPEAKER_03]: Right. And whereas I will go so far as to like claim it's altruistic or something like that, there's also just the reality.

[00:49:42] [SPEAKER_03]: If you're running a focus factor strategy, you know, back to the ergodicity like conversation a minute ago, like, you know, there's any periods where this frigging like sucks.

[00:49:52] [SPEAKER_03]: You're going to hate this and you're going to think it's awful.

[00:49:54] [SPEAKER_03]: So isn't it better to have that conversation up front of being like the only way we get growth on the other side of this is to on occasion experience a lot of pain.

[00:50:02] [SPEAKER_03]: That type of transparency lends itself nicely to the relationship you have to build to take on a higher risk strategy and have it succeed.

[00:50:10] [SPEAKER_04]: So this last one was our, his answer to our question.

[00:50:12] [SPEAKER_04]: If you could teach the average investor one lesson, what would it be?

[00:50:15] [SPEAKER_04]: So here's Guy talking about being kind to yourself.

[00:50:17] [SPEAKER_00]: I think that something that is really, really important, especially in this environment, I think that we have a lot of investors who may have felt like they were overexposed to, you know, growth stocks with no earnings.

[00:50:31] [SPEAKER_00]: They may have invested far too much in crypto.

[00:50:35] [SPEAKER_00]: So, you know, I think a lot of investors right now, maybe they invested long on the yield curve and they're kind of shocked to see interest rates rise and they're looking at losses on their bond portfolio.

[00:50:48] [SPEAKER_00]: And I think that point number one is be kind to yourself.

[00:50:54] [SPEAKER_00]: You're only human.

[00:50:55] [SPEAKER_00]: It's okay to be human.

[00:50:57] [SPEAKER_00]: Don't think of yourself as a god.

[00:50:59] [SPEAKER_00]: Don't compare yourself as a god.

[00:51:01] [SPEAKER_00]: Don't compare yourself to lottery winners.

[00:51:03] [SPEAKER_00]: That's not the comparison that you want to make.

[00:51:07] [SPEAKER_00]: And so that kind of healthy sense of self-forgiveness on the one hand, while at the same time having a healthy sense of being willing to continue to take action and being willing to continue to put yourself out there, if you like, on an investing standpoint or in terms of, I mean, it also applies in learning in public.

[00:51:29] [SPEAKER_00]: So, you know, take your lumps, be forgiving.

[00:51:33] [SPEAKER_00]: Don't let them push you into inaction and continue to learn and update your models of the world.

[00:51:39] [SPEAKER_00]: And it's by the act of forgiving ourselves for mistakes in the past to continue to be brave and to find.

[00:51:47] [SPEAKER_00]: And if something that we haven't covered, actually, is that we've talked about kind of, quote, risk averse approaches to the world.

[00:51:54] [SPEAKER_00]: And the question is, how do you be risk averse?

[00:51:59] [SPEAKER_00]: How do you take care of the downside?

[00:52:01] [SPEAKER_00]: How do you make sure that you're not on a path, one of those, you know, slicing yourself into a thousand people, one of the paths that takes you to a big fat zero?

[00:52:10] [SPEAKER_00]: But at the same time, continue to put yourself out there.

[00:52:13] [SPEAKER_00]: Continue to find ways to benefit from the upside that the markets and life can offer you without risking everything.

[00:52:21] [SPEAKER_00]: And that kind of, I think part of that is being forgiving to yourself.

[00:52:25] [SPEAKER_00]: So I think that to be the man in the arena, whether it's in your investing, to be the person taking action, to be taking positive action, to be exposing yourself to the upside, you need to accept and understand that you will make mistakes.

[00:52:41] [SPEAKER_00]: You need to forgive yourself the mistakes and you need to make sure that the mistakes don't wipe you out so you continue to play in the game, if you like.

[00:52:49] [SPEAKER_00]: Like that's, I don't know if that's a composite point or one point, but I think that's what I kind of want to end with.

[00:52:56] [SPEAKER_04]: Yeah, you know, this for me, this is something I struggle with a lot because like I tend to be a very driven person.

[00:53:02] [SPEAKER_04]: And so I think part of being a very driven person is holding yourself to a very, very high standard.

[00:53:07] [SPEAKER_04]: But then there's the flip side of that.

[00:53:08] [SPEAKER_04]: Like you can't just be beating yourself up all day and expecting it always to be better and better and better and better.

[00:53:13] [SPEAKER_04]: So like, I don't know, do you have any advice on it?

[00:53:15] [SPEAKER_04]: But it's been an interesting challenge for me because I think part of what makes you successful is your ability to hold yourself to a high standard.

[00:53:21] [SPEAKER_04]: But there's also a point where you have to be kind to yourself and be like, you know what?

[00:53:24] [SPEAKER_04]: You got these eight decisions right because you got the ninth one wrong.

[00:53:26] [SPEAKER_04]: Like don't destroy yourself for it.

[00:53:29] [SPEAKER_03]: I think possibly the most powerful number one as a person who just perennially like beats the crap out of myself and personlessly.

[00:53:37] [SPEAKER_03]: And to, to, to a fall, you know, it's one of those things.

[00:53:41] [SPEAKER_03]: I had a nickel for every time.

[00:53:43] [SPEAKER_03]: And my wife said, stop being so hard on yourself.

[00:53:45] [SPEAKER_03]: You know, probably be more financially successful just on your nickels alone.

[00:53:50] [SPEAKER_03]: But this idea, and I did this interview with Julia Carrion, who's a financial professional in like the more,

[00:53:59] [SPEAKER_03]: like not as an advisor or as an investor, but as a people person, like a lot of HR, a lot of like diversity, inclusion,

[00:54:06] [SPEAKER_03]: a lot of doing that, not just for like women and like the top end of these major firms,

[00:54:11] [SPEAKER_03]: but also for young people coming into firms and the clients, like the kids of clients for people like that you and I take care of.

[00:54:17] [SPEAKER_03]: She's been a real, real advocate for them over the last 15 years.

[00:54:20] [SPEAKER_03]: And she, she and Hal Hirschfeld came on a just press record with me and they had a conversation.

[00:54:25] [SPEAKER_03]: So Hal was explaining this idea of you right now sees your future self as a totally different person.

[00:54:32] [SPEAKER_03]: Like future Jack is not current Jack.

[00:54:35] [SPEAKER_03]: And that seems like a maybe dumb or obvious statement, but he's got the psychological literature and the studies to back up.

[00:54:42] [SPEAKER_03]: No, you actually treat them like a, like a different person to the person who's smoking today.

[00:54:47] [SPEAKER_03]: They don't think of themselves with emphysema 20 years down the road and go like, oh, maybe I should be a little bit nicer to them.

[00:54:53] [SPEAKER_03]: They might a little bit, but they don't tend to have a sympathetic or empathetic relationship with that person out of time.

[00:54:59] [SPEAKER_03]: And in this conversation, Julia proceeds to talk about how she quit this very high profile job.

[00:55:05] [SPEAKER_03]: She in the rebound accepts her role as like the CEO or CIO of like, um, there's like health tech company that realizes her heart's not in it, quits that job, moves back into doing something else.

[00:55:16] [SPEAKER_03]: And she talked about how this felt like missteps, how she was kind of like beating herself up at the time over these missteps.

[00:55:23] [SPEAKER_03]: But the real lesson here was they're not missteps if they're all steps forward.

[00:55:28] [SPEAKER_03]: And this goes back to the initial point about like being in alignment between your inner and your outer self.

[00:55:33] [SPEAKER_03]: So you're actually going success is always going to be a rear view mirror calculation.

[00:55:38] [SPEAKER_03]: There's no forward success.

[00:55:40] [SPEAKER_03]: So all you can do is just be stepping in the right direction, which means every time you step off the path is the next second or third or fourth step after that, a step back on.

[00:55:49] [SPEAKER_03]: And if you're doing that, if you're correcting back towards it with an awareness, with some sympathy for the future, future self you hope to grow into, but definitely don't know and are just trying to build in the moment.

[00:55:59] [SPEAKER_03]: It's a really powerful thing.

[00:56:00] [SPEAKER_03]: You tend to be a lot nicer to yourself when you're just like, instead of judging a million decisions, just judge the one right in front of you.

[00:56:07] [SPEAKER_03]: Judge the one that you're making in this next absolute second.

[00:56:09] [SPEAKER_03]: And if that's a step in the right ish direction, success comes, I think, from that over and over and over again.

[00:56:15] [SPEAKER_04]: And the other thing is this time, back to what we talked about at the beginning, the idea of mistakes, because a lot of times these mistakes end up being something that leads to something much, much better in the future.

[00:56:23] [SPEAKER_04]: And so if you didn't make them, you might not have ever gotten to the thing that's much, much better in the teacher.

[00:56:27] [SPEAKER_04]: So that's something I try to tell myself a lot.

[00:56:29] [SPEAKER_04]: Like when I'm like, oh, this is a horrible mistake you made.

[00:56:31] [SPEAKER_04]: I'm like, you learn something from it.

[00:56:32] [SPEAKER_04]: You'll probably do something better with it in the future than you would have if you'd never made it in the first place.

[00:56:36] [SPEAKER_03]: You don't learn without paying some form of tuition.

[00:56:39] [SPEAKER_03]: It doesn't mean you need to have a life ending, devastating, horrible piece of trauma in your lap.

[00:56:44] [SPEAKER_03]: But it does mean you have to make these at least little micro mistakes, bad choices, whatever else, to get that growth to come.

[00:56:50] [SPEAKER_03]: Growth comes from resistance.

[00:56:53] [SPEAKER_03]: Like that's just a simple matter.

[00:56:54] [SPEAKER_03]: So the real question here, Jack, is were we colossally misstepping and failing away while taking this as our FSA dispute?

[00:57:02] [SPEAKER_04]: I don't think so.

[00:57:03] [SPEAKER_04]: I think this is actually a good one for me.

[00:57:04] [SPEAKER_04]: This is a little outside of my usual topics I'd be talking about.

[00:57:07] [SPEAKER_04]: So I didn't get to talk about the value factor a lot.

[00:57:09] [SPEAKER_04]: So I think it was good for me.

[00:57:10] [SPEAKER_03]: But the values factor shines strong with you.

[00:57:13] [SPEAKER_03]: My little B Martin over there across the screen formation.

[00:57:16] [SPEAKER_04]: The only other thing I'll say as we wrap up, like I want to give a plug for you mentioned your interview with Julia and how at Cultist Creative on YouTube, your personal YouTube channel.

[00:57:23] [SPEAKER_04]: Like I know like from when we did it, like starting out a YouTube channel is freaking hard.

[00:57:27] [SPEAKER_04]: And you're putting out really, really good stuff.

[00:57:29] [SPEAKER_04]: You're bringing two people together who on the surface don't have much in common or it doesn't seem like they have much in common.

[00:57:33] [SPEAKER_04]: You're having really great conversations.

[00:57:35] [SPEAKER_04]: You'll see a lot of names on there that we've also had on our podcast.

[00:57:38] [SPEAKER_04]: Like I would definitely recommend anybody who likes listening to Matt on this, you know, head over there.

[00:57:42] [SPEAKER_04]: Subscribe to Cultist Creative and then watch just press record.

[00:57:44] [SPEAKER_04]: And with that, I guess we will wrap up.

[00:57:46] [SPEAKER_04]: We'll see everyone next time.

[00:57:48] [SPEAKER_04]: Thanks, Jack.

[00:57:49] [SPEAKER_04]: See you soon.

[00:57:49] [SPEAKER_02]: Hi, guys.

[00:57:49] [SPEAKER_02]: This is Justin again.

[00:57:51] [SPEAKER_02]: Thanks so much for tuning into this episode.

[00:57:53] [SPEAKER_02]: You can follow Jack on Twitter at Practical Quant.

[00:57:57] [SPEAKER_02]: You can follow me on Twitter at JJ Carbono and follow Matt on Twitter at Cultist Creative.

[00:58:03] [SPEAKER_02]: If you found this discussion interesting and valuable, please subscribe in either iTunes or on YouTube or leave a review or a comment.

[00:58:10] [SPEAKER_02]: Also, if you have any ideas for topics you'd like us to cover in the future, please email us at accessreturnspod at gmail.com.

[00:58:17] [SPEAKER_02]: We would like this to be a listener-driven podcast and would appreciate any suggestions.

[00:58:21] [SPEAKER_02]: Thank you.